Two months ago, Chicago, the windy city, played host once again to the Radiology Society of North America (RSNA) conference. Like previous years, the conference brought together industry participants, regulators, academics, medical professionals, care providers, and a host of other imaging stakeholders to showcase the latest in medical imaging as well as discuss the challenges the industry faced. The 2016 conference was, however, notably smaller with fewer product launches and announcements when compared to previous years. This begs the question as to whether this represents an imaging industry under the strain of broad sweeping reimbursement cuts and regulatory challenges, or whether this is more of a one-off occurrence. To better answer this question, it will be necessary to take a look at some of the reimbursement and regulatory challenges in store for medical imaging over the coming years.

Site-neutral Payments:  Disrupting the Status Quo

Over the past few years, there have been a number of acquisitions of free standing imaging and radiology centers by hospitals and health systems. This has widely been in response to reimbursement regulations that stipulated that free standing imaging / radiology centers are only allowed to bill at Medicare Physician Fee Schedule (MPFS) rates while hospital-based outpatient centers were allowed to bill at much higher Hospital Outpatient Prospective Payment System (HOPPS) rates.  As a consequence, radiology and imaging centers sought to be acquired by hospital off-campus centers to qualify for HOPPS payments. This resulted in a spike in reimbursement costs, with hospitals shifting a majority of the outpatient imaging to these acquired facilities. To rein in costs, the Centers for Medicare and Medicaid Services (CMS) will launch Site-neutral payments in 2017. Site-neutral payments mandate that off-campus hospital outpatient departments (which include imaging / radiology centers) will only be allowed to bill at Physician Fee Schedule PFS rates. This move is expected to save Medicare USD 500 million over the course of the year. It is important to note here that Site-neutral payments are expected to be replaced by a new rule in 2018, but Medicare does possess the capacity to extend should the need arise.

Hospitals and imaging and radiology centers have, in anticipation of Site-neutral payments, shifted from a model of outright acquisition to that of partnerships and joint ventures. While this has led to significant cost savings to hospitals in terms of cost of acquisition, Site-neutral payments pose a challenge to imaging vendors. With anticipated reimbursement reductions for hospital owned off-campus facilities, there will be a clear-cut preference towards continuing with legacy systems, coupled with judicious use of in-field upgrades whenever applicable over outright acquisition of new systems. Imaging vendors will be hard pressed to demonstrate cost savings in the long run through adoption of new technologies. In an era marked by purchasing decisions made on clear demonstration of comparable or better safety and efficacy, vendors will need to work more closely with hospitals and other imaging / radiology centers to ensure cost savings through improved workflow efficiencies.

Medicare Access and the Children’s Health Insurance Program (CHIP) Reauthorization: Greater Emphasis on Quality

Congress passed the Medicare Access and CHIP Reauthorization Act (MACRA) in 2015, which will permanently replace the Sustainable Growth Rate formula with two new tracks for physician payment. These are the Merit-based Incentive Payment System (MIPS) and Advanced Alternate Payment Models (APM). Under MACRA, radiologist reimbursements will fall under the MIPS track. Under MACRA, payments made to radiologists in 2019 will take into account performance in 2017. The 3 major performance categories and respective weights used in MIPS are quality (60%), advancing care information (25%), and improvement activities (15%).  Creating quality metrics for medical imaging is considered a major challenge given that quality measures are usually tied to outcomes. Within medical imaging, it is necessary to think abstractly and adopt a “drill down approach” when developing quality metrics. While some metrics can be tied to soft outcomes such as reduction of imaging errors, there is still much work to be done to create imaging specific quality metrics.

With the implementation of MACRA in mind, quality is an important theme among imaging and imaging informatics vendors. Large imaging firms have begun to showcase newly developed in-house analytics solutions that better help radiologists store, view, analyze and disseminate data. Smaller firms with limited capabilities are also actively collaborating with analytics providers to create imaging-specific tools and solutions. Analytics is expected to play a major role in improving quality by enabling dose reductions, reduced scan times, increased patient volumes, and improved image quality.

Equipment Design Modularity: A Double-edged Sword

The last few years have been marked by a wave of acquisitions between hospitals and other hospitals as well as between hospitals and imaging / radiology centers. These acquisitions have placed a great emphasis on eliminating duplications and redundancies. Use of big data and imaging analytics will allow large imaging and radiology chains as well as hospitals that own multiple off-campus facilities to analyze scan patterns and patient populations across multiple sites.  This will be pivotal in allocating resources based on unique population demands. As a consequence, outright replacement of legacy replacements will be gradually replaced by in-field upgrades whenever applicable.

Capitalizing on this trend, vendors at RSNA have placed special emphasis on demonstrating equipment design modularity in existing and newer imaging systems. For example, the ability to upgrade from 16-slice to 64-slice CT in-field is seen as a major value-add for customers with small budgets. Likewise, another major trend is miniaturization, with newer modalities possessing a small enough footprint to be placed in small imaging centers if required. This thinking is in line with the overall trend of hospitals and imaging chains allocating modalities to imaging sites based on historical scan trends of local populations. Another major trend is portability, without compromise on quality. This is especially true in the ultrasound space with market participants seeking to bring ultrasound technologies to new market participants such as paramedics, ambulatory surgical centers, and retail / urgent care clinics as well as to nontraditional ultrasound areas, e.g. neurology.

Conclusions: Medical Imaging in a Climate of Political Uncertainty

Much has been written about the possible impact of the recent presidential election on healthcare. While pundits and analysts have predicted a broad range of scenarios, it is important to note that introduction of new reimbursement models like MACRA, coupled with regulations impacting Medicare reimbursement cuts and Site-neutral payments will continue owing to strong bipartisan support prior to the elections. While there has been much rhetoric on the need to roll back and replace the Affordable Care Act, there is no concrete alternative that has been proposed. There is also a strong belief that drastic changes to the ACA may create a vacuum of uncertainty for the healthcare industry, regulators, and policy makers.

In this time, it is important to look at medical imaging within the broader context of value-based care. With the establishment of clinical care pathways for the treatment of diseases, medical imaging is set to play a key role in contributing, albeit indirectly, towards improved health outcomes. Advancements in imaging means that medical imaging will play a greater role in assessing the efficacy of current treatments for care providers to make more informed decisions. The theme of this year’s show, “Beyond Imaging,” has emphasized going beyond the modality and enabling radiologists to better understand their patient cases and go beyond providing simple imaging services to play a more active physician consultant role.

Frost & Sullivan expects that future shows will see vendors place emphasis on more collaborative approaches with care providers to make imaging an integral part of treatment care pathways. While this could translate to a lesser emphasis on launches of new modalities and other products, medical imaging is getting ready to play its most important role yet in the healthcare industry.

About Frost & Sullivan

For six decades, Frost & Sullivan has been world-renowned for its role in helping investors, corporate leaders and governments navigate economic changes and identify disruptive technologies, Mega Trends, new business models and companies to action, resulting in a continuous flow of growth opportunities to drive future success.

Frost & Sullivan

For six decades, Frost & Sullivan has been world-renowned for its role in helping investors, corporate leaders and governments navigate economic changes and identify disruptive technologies, Mega Trends, new business models and companies to action, resulting in a continuous flow of growth opportunities to drive future success.

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